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+--- Thread: PROVISIONS IAS- 37 (/thread-provisions-ias-37)
PROVISIONS IAS- 37 - zia ahmad - 12-21-2009
AOA.
i want to know that
Can amount of provision be recognized for any type of losses that is
expected in future period?
- kamranACA - 12-21-2009
Dear
Under IAS-37, Provision is recognised when
- there is a "PRESENT" legal or consturctive obligation as a result of "PAST EVENTS".
- due to such an obligation it becomes PROBABLE (and not certain) that an outflow of resources embodying economic benefits will be required to settle the obligation; and
- a reliable estimate of the obligation can be made.
For making a provision it must be an estimate of the "obligation" as at the reporting date (balance sheet date) i.e. the estimate must be PRESENT. Further, such estimate must be made as a result of something that has happened before such reporting / balance sheet date i.e. the PAST EVENT.
IAS-37 does not allow recognising provisions for future expenditure.
The provisions allowed for restrcuturing plans in case of acquisitions and the provisions required for site restoration on mining prrojects (that has to be made in future) must not be misconstrued as purely for future expenditure. Because these are also given rise by PAST EVENTS and at the balance sheet date an estimate can be made therefor.
Regards,
KAMRAN.
- zia ahmad - 12-22-2009
THANKS FOR HELP.